Here's Why Tungsten Mining (ASX:TGN) Can Afford Some Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Tungsten Mining NL (ASX:TGN) does have debt on its balance sheet. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Tungsten Mining's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Tungsten Mining had debt of AU$4.06m, up from none in one year. On the flip side, it has AU$2.52m in cash leading to net debt of about AU$1.54m.

How Strong Is Tungsten Mining's Balance Sheet?

The latest balance sheet data shows that Tungsten Mining had liabilities of AU$5.11m due within a year, and liabilities of AU$9.23m falling due after that. On the other hand, it had cash of AU$2.52m and AU$27.9k worth of receivables due within a year. So its liabilities total AU$11.8m more than the combination of its cash and short-term receivables.

Since publicly traded Tungsten Mining shares are worth a total of AU$74.6m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Tungsten Mining will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Tungsten Mining

Given its lack of meaningful operating revenue, investors are probably hoping that Tungsten Mining finds some valuable resources, before it runs out of money.

Caveat Emptor

Importantly, Tungsten Mining had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost AU$6.3m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled AU$9.3m in negative free cash flow over the last twelve months. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example Tungsten Mining has 3 warning signs (and 2 which are significant) we think you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.